Calculate the short run equilibrium and the long price output?

Question

ABCT, Inc., has been granted a limited-term exclusive license to operate a cable television system in Jackson, Wyoming. Recent operating experience in similar locations suggests a close relation between the monthly price for basic service and the number of subscribers.

A. Complete the following table based on ABCT’s projected price, output, and monthly total cost data:

Price($000)= 50, 40, 30, 25, 20, 15

Output= 0, 1, 2, 3, 4, 5,

TR= unknown

MR($000)= unknown

TC($000) = unknown

MC= 0, 20, 40, 60, 80, 100

B. Calculate the short-run equilibrium monopoly price/output combination and profit level.

C. Calculate the long-run price/output combination and profit level if competitive bidding for the franchise resulted in a perfectly competitive market outcome.

Answer 1

A:

P...Q....TR.....MR.....MC..... TC....Profit

50..0.....0.......0.........0......... 0.........0

40..1....40.....40......20......... 20....+20

30..2....60.....20......40......... 60.......0

25..3....75.....15......60........ 120....-45

20..4....80.......5......80........ 200...-120

15..5....75......-5.....100....... 300...-225

B:

Equilibrium: MC=MR P=40 Q=1 Profit=TR-TC=40-20=+20

C:

Profit=0 TR=TC 60=60 Q=2 P=30

Added:

Though it seems like $000 means thousands so:

A:

P($000).Q.TR..MR($000).MC.. TC($000)

50.........0..00'000.....00......0....... 0.00

40.........1..40'000.....40.....20....... 0.02

30.........2..60'000.....20.....40....... 0.06

25.........3..75'000.....15.....60....... 0.12

20.........4..80'000......5......80...... 0.20

15.........5..75'000.....-5.....100...... 0.30

B:

Equilibrium: MC=MR P=20'000 Q=4 Profit=TR-TC=80'000-200=+79'800

C:

Profit=0 TR=TC there no combination of TC=TR in schedule so output will be greater than Q=5'000 and price will be less than P=15.000